SP AusNet to bring asset management in-house

Electricity distributor SP AusNet will pay $50 million to enable the early termination of a deal for the external management of its assets, following similar infrastructure companies that have moved to bring that role in-house.

The agreement to end the management services agreement was flagged by SP AusNet at its half-year results in November, when the Melbourne-based company said it was reviewing the deal.

SP AusNet said on Monday it had agreed to terminate the services agreement with SPI Management Services, a fully owned subsidiary of its major shareholder Singapore Power. The two have also agreed to unwind shared IT services provided by SP AusNet to SPIMS under an agreement that dates from September 2008.

The $50 million fee represents an early termination fee representing the present value of the payment that would have been made if the management services agreement had terminated on September 30, 2015, plus the present value of estimated performance fees that would have been payable until that date.

The restructuring of SP AusNet’s IT services as a result of the unwound IT agreement, should not exceed $7.5 million, it said.

Singapore Power recently sold a 19.9 per cent stake in SP AusNet to State Grid Corporation of China.

RBC Capital Markets analyst Paul Johnston said earlier he would welcome a decision by SP AusNet to bring management of its assets in house. He said similar moves by companies such as Spark Infrastructure, Duet Group and Sydney Airport had spurred a rally in their stock prices but said that could be already factored into SP AusNet’s stock price.